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Financial Planning

How military service affects your Social Security benefits

Joe Lucey, CFP, RFC, is a Certified Financial Planner and Registered
Financial Consultant, and president of Minneapolis-based Secured Retirement
Advisors (a Registered Investment Advisor). With a 20-year career devoted to
retirees and those transitioning into retirement, he brings a wealth of insight
and strategy to the specific objectives, concerns, risks and opportunities that
this segment of the population faces. Committed to upholding the highest
standards in the industry, Joe is a member of the Ed Slott Master Elite IRA
Advisor Group and the National Ethics Bureau. As the host of "Secured Retirement
Radio," he can be heard on Twin Cities News Talk AM1130 every Saturday at 7 a.m. Joe welcomes your questions or
comments at
jlucey@securedretirements.com or visit our website at
SecuredRetirements.com. Follow
us on Twitter @joe_lucey or Like us
on Facebook.

If you served in the military, you've lived on bases, ships, installations and submarines. Your fine-dining experiences may have included hundreds of days consuming MREs and fast grabs from BXs/NEXs and commissaries. You've been deployed to remote corners of the world while immersing yourself in a lifestyle others without military service have never experienced. I am a Marine Corp veteran. Many of my clients are also former U.S. military. And what they and others need to know is that military service does have an effect on future Social Security benefits. Of course, it also depends on when you served, so let’s break it down and take a look.

Korean War, 1940-1956

If you served in the Korean War, you did not pay into FICA during your service period. Military pay was not subject to FICA tax until Jan. 1, 1957. Of course, you deserve credit for the years you served, even though those service years do not appear on your earnings record. Social Security will manually post $160 wage credits to your earnings record for each month you were in active duty.

How to register for the extra-wage credit:

To prove the months served in active duty, Social Security will require a copy of your military-discharge form (DD-214). If you have lost this form, Social Security will help you locate a copy.

Exclusions for the extra-wage credit:

If you are already receiving a military pension, the individual-wage credits will not apply.

If your military years are not within your top 35 wage-earning years, filing a (DD-214) may not be needed.

Vietnam Era, 1957-1977

Since FICA tax on military pay began on Jan. 1, 1957, your payment was most likely subject to FICA tax. While your military service will appear on your earnings record, you are entitled to receive a $300 credit in additional earnings per quarter of active duty. This credit does not appear automatically for any years prior to 1968.

How to register for the $300 quarterly credit:

The best way to prove the months served in active duty is to submit proof of service, which is usually done by filing form DD-214.

Exclusions for the extra-wage credit:

If you are already receiving a military pension, the individual-wage credits will not apply.

If your military years are not within your top 35 wage-earning years, filing a DD-214 may not be needed.

Military service 1978-present

If you served after 1978, you paid FICA tax on your military earnings. Social Security will credit you with an additional $100 for every $300 in active-duty basic pay you received. This benefit has a maximum of $1200 annually.

Exclusions for the additional $100:

If you enlisted after September 7, 1980, and did not complete your 24 months of active duty, you may not be eligible for the additional $100 credit.

In January 2002, Public Law 107-117, the Defense Appropriations Act, stopped the special extra earnings that have been credited to military-service personnel. Military service in calendar year 2002 and future years no longer qualifies for these special extra earnings credits.

Military pensions

Service members who receive a military pension can also receive a Social Security benefit. However, there are numerous factors that can effect an individual's monthly payments. For example, if you receive a military-disability pension and apply for Social Security, your total compensation becomes limited. Social Security payments also affect VA pension payments.

Also, I wish to remember the four U.S. Marines and Navel sailor who were killed in Chattanooga several weeks ago. I would like to thank them for their courageous service and sacrifice to our nation.

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